U.S. Supreme Court clarifies extraterritorial reach of U.S. patents

It is a universal theme among patent systems around the world that if you make, use or sell an invention in a country where that invention is covered by a patent, then (with limited exceptions such as research use exemptions) you will be liable for infringement in that country. So the idea of a patent obtained in country X covering the production, use or sale of an invention in country X is well understood.

What is not so well appreciated is that patents may also have extraterritorial reach, although certainly to a lesser degree. For example, in many jurisdictions, including the United States and Australia, it can be an infringing act to import a product that has been produced overseas using a method that is patented in the country of importation. So while there may be no patent covering the product per se in the country of importation, a patent covering the method of production can effectively reach across borders.

In Life Technologies Corp. et al. v. Promega Corp., No. 14-1538 (Feb. 22, 2017), the. U.S. Supreme Court recently had reason to consider the extent of the extraterritorial reach of U.S. patent law, and in particular under what circumstances a supplier might be infringing a U.S. patent to a multicomponent product when they export individual components, that are ultimately used to assemble the product outside of the U.S.

The relevant patent law in the U.S.

Section 271(f) is the provision of U.S. patent law that affects the supply and export of components of a multicomponent invention. It was enacted in response to a Supreme Court decision in the 1970's. That decision involved Deepsouth Packing, a company that had previously been found to infringe a patent when they produced and then exported a shrimp deviening machine encompassed by the patent. To circumvent the infringement, Deepsouth Packing continued to make the components of the deveining machine in the U.S., but exported them before assembly into the machine. The owner of the patent sued for infringement, but ultimately the Supreme Court found that there was no infringement because, although the components were made in the U.S., the patented machine was not. The U.S. Congress then enacted Section 271(f), closing this loophole and preventing the manufacture of components of a patented multicomponent invention in the U.S., and the subsequent exportation of the components to another country for assembly.

Section 271(f) has two parts:

Section 271(f)(1) allows for infringement liability when "all or a substantial portion of the components" of an invention patented in the United States are exported for assembly outside the country.

Section 271(f)(2) allows for infringement liability when "any component of patented invention that is especially made or especially adapted for use in the invention" is exported for assembly outside the country.

In Life Technologies v. Promega, the Supreme Court considered only Section 271(f)(1), and in particular what constitutes a "substantial portion".

Background of Life Technologies v. Promega

Life Technologies v. Promega involved U.S. Patent No. RE37,984 ("the patent"), of which Promega was exclusive licensee. The patent contained claims for a kit for genetic testing that included 5 components: (1) a mixture of specific primers; (2) nucleotides; (3) an enzyme (Taq polymerase); (4) a buffer; and (5) control DNA.

Promega sublicensed the patent to Life Technologies for the manufacture and sale of the kits in particular fields of use. Life Technologies manufactured four parts of the kit in the United Kingdom but produced one part, the enzyme (Taq polymerase), in the U.S. and exported it to the U.K. before assembling the kits.

When Life Technologies began selling the kits outside the licensed fields of use, Promega sued for infringement, asserting that Life Technologies had violated Section 271(f)(1).

In the initial trial, the jury found that Life Technologies willfully infringed the patent. The District Court then reversed this decision, holding that the supply of a single component could not constitute a "substantial portion" under Section 271(f)(1). Upon appeal to the Federal Circuit, the jury verdict of infringement was reinstated.

The Federal Circuit ruling then went to the Supreme Court for review, with the Supreme Court considering “whether the supply of a single component of a multicomponent invention is an infringing act" under Section 271(f)(1).

The decision in Life Technologies v. Promega

The Supreme Court held that a determination of what constitutes a "substantial portion" under Section 271(f)(1) is a quantitative question, not a qualitative one. Thus, the "importance" of a particular component to the working of the patented invention is irrelevant for the purposes of assessing infringement under Section 271(f)(1): what is relevant is the number of components that are supplied from the U.S..

Having determined that “substantial portion” refers to a quantitative assessment, the Supreme Court then considered whether one component could constitute “a substantial portion” of a multicomponent invention for the purposes of Section 271(f)(1). The Supreme Court held that it could not. The Supreme Court compared this with Section 271(f)(2), under which a supplier may be liable for infringement when exporting just one component if that component is especially made or adapted for use in the invention and is not a staple article or commodity.

Unfortunately, the Supreme Court did not provide any guidance on how much more than one component is needed to constitute a substantial portion for the purposes of Section 271(f)(1).

Lessons for suppliers and exporters of product components from the U.S.

This decision provides guidance to suppliers and exporters of components from the U.S., making it clear that they will not be liable for infringement in the U.S. in instances where they supply only one component of a multicomponent invention for assembly overseas. However, those suppliers and exporters will still be left guessing as to how many components will tip them over to "substantial" and put them at risk of infringement liability.

Lessons for U.S. patent applicants

For applicants with U.S. patents, this decision is a reminder that while their U.S. patent may have some extraterritorial reach, it is limited. The best way to protect an invention outside of the U.S. is to obtain patent protection in a range of jurisdictions. For many applicants, the cost of widespread global protection can be prohibitive, and careful consideration needs to be given to which jurisdictions would provide the best coverage given the predicted market activity and the various patent laws, so as to develop a patent portfolio that best aligns with commercial imperatives.